Looking For Mortgage After Chapter 7 Bankruptcy

This Article In Looking For Mortgage After Chapter 7 Bankruptcy Was Written By Gustan Cho

Looking for a Mortgage After Chapter 7 Bankruptcy? For many individuals, filing Chapter 7 Bankruptcy is closing one chapter in life and opening new doors of opportunity. There is a stigma attached to filing and going through a Chapter 7 Bankruptcy, but for many, it is a lack of understanding of what drove someone to that point. Individuals may become reluctant to apply for any type of credit after a Chapter 7 Bankruptcy Discharge because they fear rejection and become embarrassed. There are two parts in when qualifying for mortgage after Chapter 7 Bankruptcy.

  • If you just file Chapter 7 Bankruptcy, there is a two year waiting period to qualify for a FHA Loan after the discharged date of the Chapter 7 Bankruptcy
  • There is a four year waiting period to qualify for a Conventional Loan after a Chapter 7 Bankruptcy discharged date of a Chapter 7 Bankruptcy
  • If you had a mortgage as part of a Chapter 7 Bankruptcy, there is a three year waiting period from the recorded date of your foreclosure, deed in lieu of foreclosure, or short sale after the Chapter 7 Bankruptcy discharged date to qualify for a FHA Loan, VA Loan, or USDA Loan
  • If you had a mortgage part of your Chapter 7 Bankruptcy, there is a four year waiting period to qualify for a Conventional Loan after the discharged date of your Chapter 7 Bankruptcy and the deed of the property that was included in the Chapter 7 Bankruptcy can be recorded after the discharged date of the Chapter 7 Bankruptcy. This rule is different than those of FHA Loans, VA Loans, and USDA Loans

Can A Person Qualify For FHA Mortgage After Chapter 7 Bankruptcy?

Can a person qualify for a FHA Mortgage After Chapter 7 Bankruptcy?  The good news to this question in YES! HUD, The United States Department Of Housing And Urban Development which is the parent of the Federal Housing Administration or FHA,  allows FHA mortgage loan borrowers to obtain a qualified mortgage that is insured by FHA, called FHA Loans, after satisfying a two year mandatory waiting period after a Chapter 7 Bankruptcy Discharge.

Qualifying For FHA Mortgage After Chapter 7 Bankruptcy: What Should I Do During My 2 Year Waiting Period

What should I do during the two year waiting period to prepare yourself for mortgage after Chapter 7 Bankruptcy?

  • A person who has had a prior Chapter 7 Bankruptcy Discharged should make sure that they responsibly rebuild credit.
  • Re-establishing credit should be done immediately after the discharge of the Chapter 7 Bankruptcy.
  • This can be obtained by opening a secured credit card or obtaining an unsecured credit card.
  • Obtaining an unsecured credit card right after a Chapter 7 Bankruptcy Discharge will most likely not happen and most unsecured credit card credit card companies will require a credit scores of at least a 700 FICO.
  • However, you can start re-establishing credit by getting secured credit cards, preferably three with at least a $500 credit limit or more. Secured credit cards are the best, easiest and fastest tools in re-establishing your credit and improve your credit scores after a Chapter 7 Bankruptcy During this period, a borrower should show responsible use of credit, making sure to show regular payments. To obtain the highest FICO score advantages, it is important that credit card usage stays under 20% of the credit limit.

Qualifying For Mortgage After Chapter 7 Bankruptcy: Late Payments After Bankruptcy

Majority of mortgage lenders will not approve anyone for a FHA Loan if the borrower has had any late payments after a bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale no matter how high your credit scores are. You need to religiously monitor your payment history after a Chapter 7 Bankruptcy Discharge Date and make sure that you do not have any late payments period. There are lenders that will accept one or two late payments after a Chapter 7 Bankruptcy discharge, foreclosure, deed in lieu of foreclosure, or short sale, but the majority of them will require a 7 year waiting period after any lates after a bankruptcy and/or foreclosures.

It is extremely important that there are not any late payments. It is also important that you do not have new collections accounts show up after your bankruptcy filing.
Filing for bankruptcy can be life changing and difficult. However, individuals who demonstrate responsible credit use and an established payment history during the two year waiting period, should not have any issues obtaining a FHA insured residential mortgage.

About The Author

Gustan Cho is the Editor In Chief of Gustan Cho Associates Real Estate And Information Center as well as a licensed mortgage loan originator. Gustan Cho is an expert in helping home buyers with less than perfect credit scores and higher debt to income ratios and specializes in originating, processing, underwriting, and funding FHA Loans, VA Loans, USDA Loans, and Conventional Loans with no mortgage lender overlays and FHA Investor Overlays . Over 70% of Gustan Cho’s borrowers are folks who were told that they do not qualify with their lender they went to due to the mortgage lender overlays. For example, FHA requires a minimum credit score of 580 FICO to qualify for a 3.5% down payment FHA Loan. However, if a home buyer visits his or her local bank and applies for a FHA Loan with a 580 FICO credit score, the banker will tell them that they do not qualify for a FHA Loan with them because most banks have FHA Investor Overlays on credit scores where the minimum credit score they require is 640 FICO.  Gustan Cho and his team of mortgage loan originators will be able to help get you your FHA Loan approved since she specializes with no lender overlays. Please contact Gustan Cho at 262-716-8151 or email Gustan at gcho@gustancho.com if you need to consult with a loan officer with no lender overlays on FHA, VA, USDA, and Conventional Loans.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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